What Is a Reverse 1031 Exchange?

A reverse 1031 exchange is when the investor selects and buys the new property before selling the current property. After beginning a reverse 1031 exchange, the exchanger has 180 days to sell the current property and complete the purchase of the new property.

The reverse 1031 exchange is similar to a delayed 1031 exchange but takes place in the opposite order as the delayed exchange. The property owner typically first finds a new, replacement property. At that point, the property owner begins the process of purchasing that new property and must select a current property to sell in order to pay the purchase price of the new property.